In other words, nearly 75 percent of the loan money will come from a bank's own capital and the remaining 25 percent from the government fund.
And with worsening bad loan ratios, many domestic banks, especially cooperative banks, have already cut back extending credit lines to local companies. The quake has made them less willing to lend money, some reason.
"Banks won't lessen their credit criteria simply because the government provides 25 percent of the loan," the Nantou shoe factory owners said. "No matter if the interest rate is 3 percent or 8 percent, it would be the same to banks."
Reluctant banks fear further losses
Banks have their difficulties, too. An official at the Taiwan Cooper-ative Bank (
"Why? The credit risk is really very high," he said. "We do it because we have to comply with government policies."
The official also said that many SMEs in Taiwan keep two balance sheets: one for tax purposes and the other for "internal use."
"We have to be very careful, because we don't know which version we get," he said. "To be honest, in a situation like now, we prefer lending money to our old clients over new customers."
Another reason why SMEs hold little hope for obtaining loans is that the damage they report to banks has to be identical to the damage reported to the Directorate General of Customs (DGC).
"It's not a big secret that many SMEs in Taiwan are illegal factories or their tax reports don't tell the truth. For example, they have five machines, but they only report three in order to evade taxation," a Taichung screw factory owner said. "If they didn't report truthfully in the past, they are in trouble now."
For example, a company cannot apply for a loan to replace five ruined machines when a smaller number was provided to the DGC on the prior year's tax report. The company wouldn't be able to claim tax rebates for the same reason.
The ministry has recognized these problems, and one MOEA official acknowledged to the Taipei Times that even if up to NT$10 billion was used "it would be the best scenario."
He said illegal SMEs deserve what is due them and they must either absorb their losses or go bankrupt.
If it's the latter, unemployment will climb in the near future.
Therefore, the official warned that the real effects of the quake on SMEs would be seen in the coming six months, as many SMEs may not survive or will run into financial difficulties.
A construction company manager also said no SMEs will close their businesses now because they are afraid that closure could pressure up-stream and down-stream companies to collect outstanding debts.
The official also said a more precise damage report will be issued after the DGC totals the losses supplied by SMEs in their tax reports.
Even then, the actual losses may be larger, as many companies cannot list their real losses because of what was reported on prior tax claims.
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